Exports contract for fourth month in a row

The dismal overseas trade numbers came a day after the government said factory output stagnated in July, rising a miniscule 0.1% compared with the year-ago period, reinforcing evidence of an economic slowdown. Photo: Mint

New Delhi: India’s merchandise exports continued to fall in August for the fourth straight month on waning global demand, and its trade deficit widened, according to official data released on Thursday.

Exports contracted 9.7% in August to $22.3 billion (around Rs.1.2 trillion today) and imports shrank 5.08% to $38 billion, leaving a trade deficit of $15.7 billion during the month, the commerce department said.

The latest data, however, provided a “slight ray of hope” after a dramatic 14.8% shrinkage in exports in July, commerce secretary S.R. Rao said.

“I hope this will give us some confidence that we can make up,” Rao said, adding that some sectors such as pharmaceutical, engineering and textiles were showing some signs of improvement.

The dismal overseas trade numbers came a day after the government said factory output stagnated in July, rising a miniscule 0.1% compared with the year-ago period, reinforcing evidence of an economic slowdown.

The fall in exports of engineering goods in August had been expected because of depressed global market conditions, according to Aman Chadha, chairman of lobby group Engineering Export Promotion Council of India. Engineering exports declined 9.7% in August to $4.67 billion.

A recovery in merchandise exports is now expected as the US market is stabilizing, Rao said. Good monsoon rainfall will allow India to export more petroleum products as domestic demand would decline, according to him. “We will be watching for next couple of months for a clear trend to emerge.”

In the five months to August, exports shrank 5.96% to $120 billion, while imports contracted 6.2% to $191.1 billion. The trade deficit declined to $71.1 billion from $76.2 billion a year ago.

There might be a turnaround from October, said M. Rafeeque Ahmed, president of industry grouping Federation of Indian Export Organizations. The cost of credit is still a cause of concern for the export sector and a general reduction in interest rates would benefit manufacturing as well as exports, Ahmed said.

The Reserve Bank of India is widely expected to hold its policy rate at its current level of 8% in its scheduled mid-quarter monetary policy review on Monday due to high inflation despite a sharp slowdown in industrial activity.

Wholesale price inflation for August, to be released on Friday, is expected to be higher than the 6.9% registered in July.

The composite leading indicators released by the Organisation for Economic Co-operation and Development (OECD), a club of developed countries, show a loss of momentum in emerging economies, including India.